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MKS Instruments' (MKSI) Q2 Earnings Beat, Revenues Miss

Zacks Equity Research

MKS Instruments MKSI reported second-quarter 2019 adjusted earnings of $1.09 per share, which beat the Zacks Consensus Estimate by a penny but decreased 53.2% year over year.

Revenues of $474.1 million lagged the consensus mark of $487 million and declined 17.3% year over year.

Products revenues (84.6% of total revenues) were $401.3 million, down 21.3% from the year-ago quarter. Services revenues (15.4%) increased 15.3% year over year to $72.8 million.

Shares declined 4.4% to close at $85.13 on Jul 31 following the sluggish results. MKS Instruments has returned 31.7% year to date compared with the industry’s growth of 35.8%.

Year-to-date Performance



Quarter Details

Revenues from semiconductor customers (45.1% of total revenue) decreased 36.4% year over year to $214 million.

Revenues from advanced markets (54.9% of total revenue) were $260.1 million, up 9.9% from the year-ago quarter.

The company’s Vacuum and Analysis segment (49.7% of total revenue) reported revenues of $235.7 million, down 36% year over year primarily due to a slowdown in semiconductor capital equipment spending.

Light and Motion division revenues (38.5% of total revenue) were $182.6 million, down 10.9% year over year.

Equipment & solutions segment revenues were $55.9 million.

Operating Details

In the second quarter, MKS Instruments’ adjusted gross margin contracted 290 basis points (bps) on a year-over-year basis to 45%.

Adjusted EBITDA decreased 41.7% to $103.4 million. Adjusted EBITDA margin was 21.8%, significantly down from 30.9% reported in the year-ago quarter.

Research & development and sales, general & administrative expenses, as a percentage of revenues, expanded 250 bps and 430 bps, respectively.

The company reported non-GAAP operating income of $88.4 million, down 45.5% from the year-ago quarter. Adjusted operating margin was 18.6%, significantly down from 28.3% reported in the year-ago quarter.

Balance Sheet

As of Jun 30, 2019, MKS Instruments had cash and cash equivalents of $460 million. Term-loan debt outstanding is $947 million after a payment of $50 million made during the second quarter of 2019.

MKS Instruments also paid a dividend of $10.9 million or 20 cents per diluted share during the reported quarter.

Guidance

For the third quarter of 2019, MKS Instruments anticipates revenues between $415 million and $465 million.

Non-GAAP earnings are expected between 69 cents and $1.02 per share.

Zacks Rank & Stocks to Consider

Currently, MKS Instruments carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader technology sector include Digital Turbine APPS, CACI International CACI and Cisco Systems CSCO. All three stocks have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While Digital Turbine is set to release quarterly results on Aug 5, both CACI International and Cisco Systems are scheduled to report on Aug 14.

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